What changes are expected to affect HMO owners in 2018?

January 20th, 2018
What changes are expected to affect HMO owners in 2018?

2018 promises to be a year full of new challenges for buy to let landlords, especially HMOs owners.

If you are planning to expand your business and invest into HMOs in the coming year, there are new legislations and rules that you should be aware of.
Landlords who own HMOs will require new licences under the new rules.

Research by Simple Landlord Insurance found that 40% of HMO landlords in 2017 were either unaware or did not know the detail of the new laws that could force them to carry out expensive restructuring work on their properties or risk facing punitive fines. For more lenient landlords, getting caught off-guard may result into heavier fines than ever before.
According to figures from the same research, 60,000 HMOs across the UK currently require a licence, but it is estimated that a further 174,000 properties will be subject to mandatory licensing changes aimed at improving housing conditions.

New licencing rules will set minimum standards on room sizes, storage facilities and waste disposal for all HMOs, including conversions and properties of multiple use.
Furthermore, the new legislation will also scrap the rule by which HMOs with less than three storeys are not qualified for licencing.

Furthermore, new rules will give more control to local councils that will be granted additional powers enabling them to adjust the benchmark and licensing fees.
These changes will probably affect certain regions more than others, as many areas outside of London are already meeting these required new standards to be eligible for an HMO licence.

By failing to comply with new licencing legislation, landlords could find themselves with rooms they can no longer let, undersized living areas and a serious gap in their rental income.
This adds more pressure on property owners who have already been hit by new financial regulations, in particular higher rate of Stamp Duty and cuts to mortgage interest tax relief. The phased reduction of tax relief on mortgage payments began in April 2017 with the deductible reduced from 100% to 75% of mortgage interest payments against rental income.
In April 2018, relief will be further reduced to 50%, then to 25% in 2019 before being removed entirely in 2020. The relief will be replaced by a tax credit of 20%.

In addition, from April 1st 2018, new energy performance rules will affect landlords of privately rented domestic and non-domestic property in England or Wales, who will need to ensure that their properties reach at least an Energy Performance Certificate (EPC) rating of E before granting a new tenancy to new or existing tenants.

Landlords are adapting to the changes in the market and are willing to embrace the challenges and find opportunities to develop more profitable and sustainable portfolios.

As a landlord expanding their existing property portfolio, the importance of keeping properties under detailed control is key to ensure they are managed efficiently. HMOs can still be a very good investment considering they are in the right area, target the right audience and managed efficiently.

Efficient management through software

Arthur’s property management software enables you to have complete control over all aspects of your portfolio and it’s accessible from your computer, tablet or mobile phone. Arthur brings your landlords, tenants, contractors, agents and owners all under the same interface, making problem solving a breeze. With our system, you can manage your portfolio from anywhere in the world, which is guaranteed to give you a peace of mind as the buy-to-let market undergoes so many radical changes. Arthur provides you with complete flexibility and is excellent for multi-unit properties (no matter what size) such as: student accommodation, blocks of flats and HMOs.

 

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